Market Outlook: Anticipated Rebound Followed by Potential Downtrend in Nifty

As shared previously, the recent market drop appears to be more of a correction than a crash, unlike the severe declines in 1992, 2008, or even the 2018 small-cap dip.

Recently, Foreign Institutional Investors (FIIs) have been selling at an exceptional rate, with 1.5 lakh crore sold over just 45 days. This activity has driven the market down by about 11%, from a high of 26,277 to around 23,500.

To gauge the potential direction of the markets, let’s examine past corrections and compare them to the current situation

2022 Correction (18% fall, lasting 8 months)

In 2022, following the post-COVID rally, markets rose significantly from 7,500 in March 2020 to a peak of 18,600 in October 2021. After reaching this high, the market experienced a 12% correction, dropping to 16,379 over a two-month period. It then rebounded to 18,350 within 30 days, marking an 11.5% recovery, before resuming a downward trend. By June 2022, the market had bottomed at 15,200, reflecting an overall decline of 18% from the October peak.

2015 Correction (24% fall, spanning 11 months)

In 2015, following a strong rally from 5,000 in August 2013 to a peak of 9,100 in March 2015, the Nifty saw a 9.5% decline, dropping to 8,200 over a 22-day period. The index then rebounded by 7% to reach 8,800 within two weeks, but this was followed by a series of lower highs and lower lows. The correction ultimately ended in February 2016, with the market bottoming out at 6,500.

Where We Stand Now

The recent market rally, which commenced at 16,900 in March 2023, reached a peak of 26,300 in September. Since then, the Nifty index has declined by approximately 11%. Technical indicators, such as the Relative Strength Index (RSI), currently at 30, suggest the market is significantly oversold. Additionally, the index is approaching key support levels, including the 200-day moving average and the 23,300 mark, which was the previous high on election day.

Drawing parallels to the corrections observed in 2015 and 2022, we anticipate a rebound of at least 7%, potentially elevating the Nifty to the 24,900–25,100 range. However, following this expected rally, we foresee a subsequent downturn, with the Nifty possibly declining to between 21,500 and 20,000—a drop of 18–24%—over the next 6 to 8 months.